More private equity investors are finding creative ways to invest in one of the fastest-growing fields of medicine, and it seems to be paying off.
Shares of Cryoport have soared 50-percent-plus since the supply chain specialist in cell and gene therapy unveiled an investment from Blackstone Tactical Opportunities, which will fund its second acquisition over the span of a few days.
Blackstone Tac Opps is set to inject $275 million into Cryoport: $250 million of preferred stock and the remainder in common stock. The investment, announced Tuesday, will leave Blackstone with an 18 percent stake upon completion.
The PIPE deal will support Cryoport’s $320 million all-cash acquisition of MVE Biological Solutions from Chart Industries, announced on the heels of its August 21 agreement to buy CRYOPDP for €49 million ($58 million).
Shares of Cryoport finished at $55.50 per share on Friday, up 51 percent from the $36.68 at which the stock closed Monday prior to the news.
Ram Jagannath, senior managing director and global head of healthcare for Blackstone Growth and Tactical Opportunities, will join Cryoport’s board of directors.
From a private equity perspective, outsourced pharma services have long been an appealing place to park money. But with so much consolidation having already occurred within areas such as traditional CROs – or clinical research organizations – sponsors have increasingly sought to deploy capital in other niche verticals.
Enter cell and gene therapy: one of the most active areas of biopharma and pharma R&D in recent years. The industry is growing at a 50 percent CAGR.
For Blackstone – whose members have an established track record in pharma services – investing in Cryoport offered a means to ride that growth without taking on any idiosyncratic risk.
Cryoport plays an important role in the supply chain of cell & gene therapy, providing temperature-controlled logistics that can’t be easily replicated.
In cell and gene therapy, cells are extracted from the patient and transferred to a manufacturer or pharma company – and those cells in most cases have to be cryogenically stored. Cryoport solves that need.
And the runway is huge.
While today there are only four approved cell and gene therapies out in the market – all of which Cryoport works with – the company has almost 500 additional products in clinical trials in which they are the sole provider for.
With that outlook, “it’s like being a barnacle on a rocket ship,” one source said.
As additional molecules become commercialized, Cryoport’s volumes will go up, as will its revenue. The company, whose latest deal pushed its revenue run rate to over $160 million, is currently forecasting 30 percent to 40 percent annual growth.
Blackstone’s PIPE deal for Cryoport wasn’t the result of a traditional auction process. Rather, the firm got to know the company through a bank introduction. When Cryoport began simultaneously pursuing MVE and CRYOPDP, the former which emerged from a traditional sale process, it selected Blackstone to work with it in early June, a source familiar with the matter told PE Hub.
“They had these two deals that were really strategic but happened to be at the same time,” a source said. “They wanted to do both, but they wanted a thoughtful partner.”
MVE, acquired from Chart, will solidify its manufacturing capabilities in the temperature-controlled supply chain, as CRYOPDP bolsters its international footprint.
Besides the profound growth in cell and gene therapy, for Blackstone the deal also germinated from the team’s prior experience and success investing in pharma services.
Before joining Blackstone in 2019, Jagannath spent about 12 years at Carlyle, helping lead the firm’s leveraged buyout of Pharmaceutical Product Development alongside Hellman & Friedman.
Eight-plus-years later, PPD in February debuted on the public markets at an initial enterprise value close to $14 billion, up from the $3.6 valuation at which it was valued in its December 2011 take-private transaction.
Although Cryoport is the largest provider of temperature-controlled logistics for the life sciences industry, other sponsors have gotten on the cell and gene therapy train.
Furthering its push into the universe of gene therapies, Catalent in May 2019 completed its $1.2 billion all-cash acquisition of Paragon Bioservices, a contract development manufacturing organization specializing in the segment.
In connection with the deal, Catalent, a drug development services company, issued $650 million convertible preferred stock to Leonard Green & Partners. LGP Partner Peter Zippelius joined Catalent’s board.
The existing investor, Baltimore’s Camden Partners, generated a multiple of invested capital of 31x on Paragon, a source with knowledge of the matter told PE Hub at the time.
In other relevant activity, Thermo Fisher last year bought Brammer Bio for $1.7 billion in a bid to boost its CDMO capabilities in gene therapy.
Action Item: Read about Blackstone-backed HealthEdge and its recent deal for The Burgess Group